Exhibit 10.3


 


THIS
NOTE (AS DEFINED BELOW) MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE ALIENATED OR ENCUMBERED WITHOUT
THE PRIOR WRITTEN CONSENT OF INVESTOR (AS DEFINED BELOW). THIS NOTE IS SUBJECT TO A RIGHT OF OFFSET IN FAVOR OF INVESTOR UPON
THE OCCURRENCE OF CERTAIN EVENTS AS SET FORTH IN MORE DETAIL IN SECTION 6 BELOW.


 


	 	State
    of Utah
	$40,000.00	November
    1, 2016


 


SECURED
INVESTOR NOTE #1


 


FOR
VALUE RECEIVED, Typenex Co-Investment, LLC, a Utah limited liability company (“Investor”),
hereby promises to pay to Vape Holdings, Inc., a Delaware corporation (“Company”,
and together with Investor, the “Parties”), the principal sum of $40,000.00 together with all accrued and
unpaid interest thereon, fees incurred or other amounts owing hereunder, all as set forth below in this Secured Investor Note
#1 (this “Note”). This Note is issued pursuant to that certain Securities Purchase Agreement of even date herewith,
entered into by and between Investor and Company (as the same may be amended from time to time, the “Purchase Agreement”),
pursuant to which Company issued to Investor that certain Convertible Promissory Note in the principal amount of $1,413,000.00
(as the same may be amended from time to time, the “Company Note”) convertible into shares of Company’s
Common Stock. All capitalized terms used but not otherwise defined herein shall have the meanings ascribed thereto in the Purchase
Agreement.


 


1.
Principal and Interest. Interest shall accrue on the unpaid principal balance and any unpaid late fees or other fees under
this Note at a rate often percent (10%) per annum until the full amount of the principal and fees has been paid. Interest shall
be computed on the basis of a 365-day year for the actual number of days elapsed. Notwithstanding any provision to the contrary
herein, in no event shall the applicable interest rate at any time exceed the maximum interest rate allowed under applicable law,
as provided in Section 12 below. The entire unpaid principal balance and all accrued and unpaid interest, if any, under this Note,
shall be due and payable on the date that is nine (9) months from the date hereof (the “Secured Investor Note Maturity
Date”); provided, however, that Investor may elect, in its sole discretion, to extend the Secured Investor Note
Maturity Date for up to thirty (30) days by delivering
written notice of such election to Company at any time prior to the Secured Investor Note Maturity Date.


 


2. Payment. Unless
prepaid, all principal and accrued interest under this Note is payable in one lump sum on the Secured Investor Note Maturity
Date. All payments of interest and principal shall be (i) in lawful money of the United States of America, and (ii) in the
form of immediately available funds. All payments shall be applied first to costs of collection, if any, then to accrued
and unpaid interest, and thereafter to principal. Payment of principal and interest hereunder shall be delivered to Company
at the address furnished to Investor for that purpose.


 


3. Prepayment
by Investor. Investor may, with Company’s consent, pay, without penalty, all or any portion of the
outstanding balance along with any accrued but unpaid interest on this Note at any time prior to the Secured Investor Note
Maturity Date. Notwithstanding the foregoing, as soon as reasonably practicable upon Company’s effecting an increase in
its authorized but unissued shares of Common Stock and its establishment of the Share Reserve, as required pursuant to
Section 7 of the Purchase Agreement (the “Conditional Prepayment Date”), Investor shall be obligated to
prepay the outstanding balance of this Note so long as (i) no Event of Default (as defined in the Company Note) under the
Company Note shall have occurred as of the Conditional Prepayment Date, and (ii) Investor is able to clear shares of Common
Stock it receives from conversions of the Company Note or otherwise from Company for resale. If an Event of Default under the
Company Note has occurred prior to the Conditional Prepayment Date, Investor may prepay all or any portion of the outstanding
balance of this Note, but it shall have no obligation to do so.


 






     


     


    

 


4.
Security. The payment of this Note (and all the other Secured Investor Notes (as defined in the Purchase Agreement)) shall
be secured by that certain Membership Interest Pledge Agreement of even date herewith (as the same may be amended from time to
time, the “Pledge Agreement”) executed by Investor, as Pledgor, in favor of Company, as Secured Party, whereby
Investor has pledged as collateral its 40% membership interest in Typenex Medical, LLC, an Illinois limited liability company,
as more specifically set forth in the Pledge Agreement. All the terms and conditions of the Pledge Agreement are hereby incorporated
into and made a part of this Note.


 


5.
Release. Company covenants and agrees that in the event that this Note is secured by Collateral, Company shall timely execute
any and all documents necessary or advisable in order to release such security interest and Collateral to Investor, or Investor’s
designee, upon the earlier of (i) the date this Note is paid in full and (ii) the date that is six (6) months and three (3) days
following the date such Collateral is given as security for this Note, or such later date as determined in the sole discretion
of Investor (the “Release Date”). For the avoidance of doubt, as of the date hereof, there is no collateral
securing this Note, and after the Release Date, as applicable, there shall be no collateral securing this Note.


 


6.
Right of Offset. Notwithstanding anything to the contrary herein or in any of the other Transaction Documents, in the event
(i) of the occurrence of any Event of Default (as defined in the Company Note) under the Company Note or any other note issued
by Company in connection with the Purchase Agreement, (ii) of a breach of any material term, condition, representation, warranty,
covenant or obligation of Company under any Transaction Document, or (iii) Company sells, transfers, assigns, pledges or hypothecates
this Note, or attempts to do any of the foregoing, whether voluntarily or involuntarily, Investor shall be entitled to deduct
and offset any amount owing by Company under the Company Note from any amount owed by Investor under this Note (the “Investor
Offset Right”), provided that if any of the foregoing events occur and Investor has not yet exercised the Investor Offset
Right, the Investor Offset Right shall be automatically exercised on the date that is thirty (30) days prior to the Secured Investor
Note Maturity Date (an “Automatic Offset”). Other than with respect to an Automatic Offset, Investor may only
elect to exercise the Investor Offset Right by delivering to Company an offset notice in a form substantially similar to Exhibit
B to the Company Note or another form of Investor’s choosing. In the event that Investor’s exercise of the Investor
Offset Right under this Section 6 results in the full satisfaction of Investor’s obligations under this Note, then Company
shall return this Note to Investor for cancellation or, in the event this Note has been lost, stolen or destroyed, Company shall
provide Investor with a lost note affidavit in a form reasonably acceptable to Investor.


 




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7.
Default. If any of the events specified below shall occur (each, an “Investor Note Default”) Company
may declare the unpaid principal balance under this Note, together with all accrued and unpaid interest thereon, fees incurred
or other amounts owing hereunder immediately due and . payable, by notice in writing to Investor. Many default, other than a Payment
Default (as defined below), is curable, then the default may be cured (and no Investor Note Default will have occurred) if Investor,
after receiving written notice from Company demanding cure of such default, either (i) cures the default within fifteen (15) days
of the receipt of such notice, or (ii) if the cure requires more than fifteen (15) days, immediately initiates steps that Company
deems in Company’s reasonable discretion to be sufficient to cure the default and thereafter diligently continues and completes
all reasonable and necessary steps sufficient to produce compliance as soon as reasonably practical. Each of the following events
shall constitute an Investor Note Default:




 


7.1. Failure
to Pay. Investor’s failure to make any payment when due and payable under this Note (a “Payment
Default”);


 


7.2. Breaches
of Covenants. Investor’s failure to observe or perform any other covenant, obligation, condition or agreement
contained in this Note;


 


7.3. Representations
and Warranties. If any representation, warranty, certificate, or other statement (financial or otherwise) made
or furnished by or on behalf of Investor to Company in writing in connection with this Note or any of the other
Transaction Documents, or as an inducement to Company to enter into the Purchase Agreement, shall be false or misleading in
any material respect when made or furnished; and


 


7.4. Involuntary
Bankruptcy. If any involuntary petition is filed under any bankruptcy or similar law or rule against Investor, and such
petition is not dismissed within sixty (60) days, or a receiver, trustee, liquidator, assignee, custodian, sequestrator or
other similar official is appointed to take possession of any of the assets or properties of Investor.


 


8. Binding
Effect; Assignment. This Note shall be binding on the Parties and their respective heirs, successors, and assigns; provided,
however, that neither Party shall assign any of its rights hereunder without the prior written consent of the other
Party, except that Investor may assign this Note to any of its Affiliates without the prior written consent of Company and,
furthermore, Company agrees that it shall not unreasonably withhold, condition or delay its consent to any other assignment
of this Note by Investor.


 


9.
Governing Law; Venue. This Note shall be construed and enforced in accordance with, and all questions concerning the construction,
validity, interpretation and performance of this Note shall be governed by, the internal laws of the State of Utah, without giving
effect to any choice of law or conflict of law provision or rule (whether of the State of Utah or any other jurisdiction) that
would cause the application of the laws of any jurisdiction other than the State of Utah. The provisions set forth in the Purchase
Agreement to determine the proper venue for any disputes are incorporated herein by this reference.


 


10. Purchase
Agreement; Arbitration of Disputes. By acceptance of this Note, each Party agrees to be bound by the applicable terms,
conditions and general provisions of the Purchase Agreement and the other Transaction Documents, including without limitation
the Arbitration Provisions attached as an exhibit to the Purchase Agreement.


 


11. Customer
Identification—USA Patriot Act Notice. Company hereby notifies Investor that pursuant to the requirements of the
USA Patriot Act (Title III of Pub. L. 107-56, signed into law October 26, 2001) (the “Act”), and
Company’s policies and practices, Company is required to obtain, verify and record certain information and
documentation that identifies Investor, which information includes the name and address of Investor and such other
information that will allow Company to identify Investor in accordance with the Act.


 






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12.
Lawful Interest. It being the intention of Company and Investor to comply with all applicable laws with regard to the interest
charged hereunder, it is agreed that, notwithstanding any provision to the contrary in this Note or any of the other Transaction
Documents, no such provision, including without limitation any provision of this Note providing for the payment of interest or
other charges, shall require the payment or permit the collection of any amount in excess of the maximum amount of interest permitted
by law to be charged for the use or detention, or the forbearance in the collection, of all or any portion of the indebtedness
evidenced by this Note or by any extension or renewal hereof (“Excess interest”). If any Excess Interest is
provided for, or is adjudicated to be provided for, in this Note, then in such event:




 


12.1.
the provisions of this Section 12 shall govern and control;


 


12.2. Investor shall not be obligated to pay any Excess Interest;


 


12.3.
any Excess Interest that Company may have received hereunder shall, at the option of Company, be (i) applied as a credit against
the principal balance due under this Note or the accrued and unpaid interest thereon not to exceed the maximum amount permitted
by law, or both, (ii) refunded to Investor, or (iii) any combination of the foregoing;


 


12.4.
the applicable interest rate or rates shall be automatically subject to reduction to the maximum lawful rate allowed to be contracted
for in writing under the applicable governing usury laws, and this Note and the Transaction Documents shall be deemed to have
been, and shall be, reformed and modified to reflect such reduction in such interest rate or rates; and


 


12.5.
Investor shall not have any action or remedy against Company for any damages whatsoever or any defense to enforcement of this
Note or arising out of the payment or collection of any Excess Interest.


 


13. Pronouns.
Regardless of their form, all words used in this Note shall be deemed singular or plural and shall have the gender as
required by the text.


 


14.
Headings. The various headings used in this Note as headings for sections or otherwise are for convenience and reference
only and shall not be used in interpreting the text of the section in which they appear and shall not limit or otherwise affect
the meanings thereof.


 


15.
Time is of the Essence. Time is of the essence with this Note.


 


16.
 Severability. If any part of this Note is construed to be in violation of any law, such part shall be modified to achieve
the objective of the Parties to the fullest extent permitted by law and the balance of this Note shall remain in full force and
effect.


 


17.
Attorneys’ Fees. If any arbitration or action at law or in equity is necessary to enforce this Note or to collect
payment under this Note, Company shall be entitled to recover reasonable attorneys’ fees directly related to such enforcement
or collection actions.


 


18.
Amendments and Waivers; Remedies. No failure or delay on the part of either Party hereto in exercising any right, power
or remedy hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right, power or remedy
preclude any other or further exercise thereof or the exercise of any other right, power or remedy. The remedies provided for
herein are cumulative and are not exclusive of any remedies that may be available to either Party hereto at law, in equity or
otherwise. Any amendment, supplement or modification of or to any provision of this Note, any waiver of any provision of this
Note, and any consent to any departure by either Party from the terms of any provision of this Note, shall be effective (i) only
if it is made or given in writing and signed by Investor and Company and (ii) only in the specific instance and for the specific
purpose for which made or given.


 


19.
Notices. Unless otherwise provided for herein, all notices, requests, demands, claims and other communications hereunder
shall be given in accordance with the subsection of the Purchase Agreement titled “Notices.” Either Party may change
the address to which notices, requests, demands, claims and other communications hereunder are to be delivered by providing notice
thereof in the manner set forth in the Purchase Agreement.


 






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20.
Final Note. This Note, together with the other Transaction Documents, contains the complete understanding and agreement
of Investor and Company and supersedes all prior representations, warranties, agreements, arrangements, understandings, and negotiations
of Investor and Company with respect to the subject matter of the Transaction Documents. THIS NOTE, TOGETHER WITH THE OTHER TRANSACTION
DOCUMENTS, REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF ANY ALLEGED PRIOR, CONTEMPORANEOUS,
OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.


 


21.
Waiver of Jury Trial. EACH OF INVESTOR AND COMPANY IRREVOCABLY WAIVES ANY AND ALL RIGHTS SUCH PARTY MAY HAVE TO DEMAND
THAT ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR IN ANY WAY RELATED TO THIS NOTE OR THE RELATIONSHIPS OF THE PARTIES
HERETO BE TRIED BY JURY. THIS WAIVER EXTENDS TO ANY AND ALL RIGHTS TO DEMAND A TRIAL BY JURY ARISING UNDER COMMON LAW OR ANY APPLICABLE
STATUTE, LAW, RULE OR REGULATION. FURTHER, EACH PARTY HERETO ACKNOWLEDGES THAT SUCH PARTY IS KNOWINGLY AND VOLUNTARILY WAIVING
SUCH PARTY’S RIGHT TO DEMAND TRIAL BY JURY.


 


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IN
WITNESS WHEREOF, the Parties have executed this Note as of the date set forth above.


 


	 	INVESTOR:
	 	 	 	 
	 	Typenex
    Co-Investment, llc
	 	 	 	 
	 	By:	Red
    Cliffs Investments, Inc., its Manager
	 	 	 	 
	 	 	By:	/s/ John M. Fife
	 	 	 	John
    M. Fife, President


 


	
        ACKNOWLEDGED, ACCEPTED AND AGREED:

         

        COMPANY:
	 
	 	 
	Vape
    Holdings, Inc.	 




 


	By:	/s/
    Benjamin Beaulieu	 
	 	Benjamin
    Beaulieu, CEO	 


 






[Signature
Page to Secured Investor Note #1]


 


 


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